This week, dear readers, we admit it: We might’ve gotten a little caught up in all the stock rally excitement. Good thing there were no consequences and, assumedly, never will be. We’re banking on this being the bull run that lasts forever. More or less.
Now the bears — and you’ll recall that all groups of differing opinions regarding any and all economic developments can be neatly bifurcated into bears and bulls — will tell you that the fundamentals aren’t there. They’ll point to things like, for example, the State Council cutting prices for power from coal-fired plants in what some would characterize as a desperate bid to bolster an industry in which sudden state-prompted consolidation and the imposition of stricter regulations after decades of lax enforcement allowed the industry to turn softer than squishy, lignite-grade coal now threaten the very bedrock of economic growth.
Or maybe they’ll tell you all about how Cloud Live Technology Group, née corruption-probed restaurant chain Beijing Xiangeqing, announced it would miss payments this week, making it the second onshore default in the corporate bond market here and, in the eyes of some, further exemplifying the troubling trend of inappropriate diversification among formerly profitable firms whose bread and butter business has been upended in the course of the past two years by the tectonic tumult rumbling under the foundations of China’s economy as the country attempts an unprecedented shift away from export addiction while simultaneously strangulating major sources of local consumption via an extended corruption crackdown.
They’ll almost certainly point out that once-profitable property developer Kaisa has continued to struggle as it attempts to restructure $7.6 billion it owes in an increasingly vain attempt to avoid becoming China’s third-ever debt defaulter, even as a growing cohort of creditors apply for asset preservation and many of its units in Shenzhen (the freezing of which led to the company’s current sorry state of affairs) remain unable to be sold on government orders, all of this purportedly pointing to a complex web of machinations rife with ramifications for the broader country-wide real estate market upon which so much of the country’s growth still depends despite authorities’ best intentions.
And only a dirt-eating idiot wouldn’t draw your attention to the fact that mainland market sentiment has seemingly become so frenzied that not even a second crackdown on rule-breaking brokerages was able to temper the abounding enthusiasm among investors for a seemingly peak-free frenzy of growth in shares of firms that less than half a year ago were envious of penny stocks for their relatively high valuation.
But we’d fire right back, dear readers, by pointing out that with the rally bleeding over into Hong Kong — prompted in part by state media with headlines along the lines of (and this is 100% not a joke) “Go! Buy Hong Kong Stocks!” — pretty soon we’ll all have no choice but to pin our hopes on mainland investors never, ever wavering in their enthusiasm for upward-trending stock prices, even for a second. And so long as we don’t spook them, they won’t.
So join us, won’t you? So long as we keep smiling and stay a little smarter than most there might be a brief window in which we can jump ship before the masses get wise. And given that a recent survey found nearly 6% of new mainland retail investors were illiterate, we’d say the odds are at least slightly in our favor.